This repository contains a number of phase diagrams for the textbook New Keynesian model (NK) and its variant with wealth in the utility function (WUNK). The phase diagrams describe a range of situations:
- Normal times - The natural rate of interest is positive, and monetary policy is active.
- Zero lower bound (ZLB) - The natural rate of interest is negative, and the monetary-policy rate is zero.
- ZLB episode of finite duration - The economy is at the ZLB between time 0 and time T, and it returns to normal after time T.
- ZLB episode with forward guidance - The economy is at the ZLB between time 0 and time T. The economy is then in forward guidance between time T and time T+ D: the natural rate of interest is positive but the monetary-policy rate is zero. Finally, the economy returns to normal after time T+D.
- ZLB episode with government spending - The economy is at the ZLB between time 0 and time T. During the ZLB, government spending is positive. The economy returns to normal after time T.
All the phase diagrams are produced with Keynote (version 11.2) on a Mac (macOS Monterey 12.2.1). The folders nk and wunk contains Keynote files for all the phase diagrams. The folder pdf contains the same phase diagrams saved as PDF files.
The construction of the phase diagrams is described in the article "Resolving New Keynesian Anomalies With Wealth in the Utility Function", by Pascal Michaillat and Emmanuel Saez. The article (article.pdf) and its online appendix (onlineappendix.pdf) are included in the repository for reference.
The folder nk includes the following phase diagrams for the NK model:
nk_normal.key- NK model in normal times (fig. 1A in the article)nk_zlb.key- NK model at the ZLB (fig. 1C in the article)nk_shortzlb.key- NK model with short ZLB episode (fig. 2A in the article)nk_longzlb.key- NK model with long ZLB episode (fig. 2C in the article)nk_fg.key- NK model in forward guidance (fig. 3A in the article)nk_shortfg.key- NK model when ZLB is followed by short forward guidance (fig. 3B in the article)nk_mediumfg.key- NK model when ZLB is followed by medium forward guidance (fig. 3C in the article)nk_longfg.key- NK model when ZLB is followed by long forward guidance (fig. 3D in the article)nk_nog.key- NK model at ZLB with no government spending (fig. 5A in the article)nk_lowg.key- NK model at ZLB with low government spending (fig. 5B in the article)nk_mediumg.key- NK model at ZLB with medium government spending (fig. 5C in the article)nk_highg.key- NK model at ZLB with high government spending (fig. 5D in the article)
The folder wunk includes the following phase diagrams for the WUNK model:
wunk_normal.key- WUNK model in normal times (fig. 1B in the article)wunk_zlb.key- WUNK model at the ZLB (fig. 1D in the article)wunk_shortzlb.key- WUNK model with short ZLB episode (fig. 2B in the article)wunk_longzlb.key- WUNK model with long ZLB episode (fig. 2D in the article)wunk_fg.key- WUNK model in forward guidance (fig. 4A in the article)wunk_shortfg.key- WUNK model when a short ZLB episode preceeds forward guidance (fig. 4B in the article)wunk_longfg.key- WUNK model when a long ZLB episode preceeds forward guidance (fig. 4C in the article)wunk_allfg.key- WUNK model with all possible ZLB and forward guidance durations (fig. 4D in the article)wunk_nog.key- WUNK model at ZLB with no government spending (fig. 6A in the article)wunk_lowg.key- WUNK model at ZLB with low government spending (fig. 6B in the article)wunk_mediumg.key- WUNK model at ZLB with medium government spending (fig. 6C in the article)wunk_highg.key- WUNK model at ZLB with high government spending (fig. 6D in the article)